Financing Case Analysis Of Xuzhou Metro Project

Since 2014,the State Council issued a series of documents to promote PPP mode to help introduce social capital,reduce the pressure on project financing,and increase the supply of public goods in infrastructure construction projects.With favorable policies,more and more urban rail transit projects are attempting to adopt PPP mode for financing.The research on the financing case of Xuzhou Metro Project meets the current situation of large-scale infrastructure construction in China,provides experience for other similar projects and has certain practical significance.This paper starts with PPP mode theory and the urban rail transit investment and financing theory,which defines PPP mode,summarizes the economic attributes and financing characteristics of urban rail transit,and concludes current urban rail transit financing modes.Then,it briefly describes the financing background of the Xuzhou Metro Project,introduces initial difficulties of the project financing,and finds that Xuzhou Metro Project ultimately use a separating PPP mode and successfully land.Afterwards,this paper sorts out the trading structure and supporting mechanism of the separating PPP mode,and compares it with the financing integration or AB package mode adopted by other urban rail transit projects.Further analysis finds that the main reason for adopting this mode in Xuzhou Metro Project is that Xuzhou,as a second-and-third-tier city,has lower urban volume,smaller market space,and higher government financial pressure than first-tier cities such as Beijing and Shenzhen.Therefore the primary goal of Xuzhou Metro Project is to reduce financing pressure.The separating PPP mode helps achieve that goal and get good results.Firstly,the separating PPP mode reduces the project's requirements for the overall strength of social capital,expands the optional range for social capital,ensures the professional strength of social capital,and cuts down the cost of social capital.Secondly,the separating PPP mode reduces the government's financial expenditure pressure by cutting down both capital investment and financial subsidies.Thirdly,under the separating PPP mode,the financing risk of the design-construction sector is well controlled,the demand risk is borne by the government,and the overall risk sharing of the project reflects the principle of optimizing risk allocation.Those three economic characteristics of Xuzhou Metro Project are likely to be possessed by many second-and-third-tier cities.Therefore,other second-and-third-tier urban rail transit projects may properly consider using the separating PPP mode,achieving revenue and reducing expenditure in project design,and introducing the concept of sustainable development.At the same time,the successful landing of Xuzhou Metro Project has also brought inspiration for other types of infrastructure construction projects,including adopting PPP mode for overall planning,exploring different ways to obtain multiple funds,and establishing a system relating to both risk and performance.